Financing costs have shot up so fast in the US that a typical house is now out of range for Americans earning less than $100,000.
Buyers last month needed to earn $107,281 to afford the monthly mortgage payment on a median-priced home, up nearly 46% from $73,668 a year ago, according to a report from brokerage Redfin Corp.
The Federal Reserve’s efforts to curb inflation have helped push borrowing costs above 7% for a 30-year fixed mortgage, turning homeownership into an increasingly exclusive club that’s out of reach for first-time buyers without high incomes or equity to tap. Even buyers who aren’t income-constrained are stepping back because homes in their range no longer meet their requirements.
“Affordability challenges are a major reason why home sales have slowed so dramatically over the last few months,” Redfin said in the report.
The measure of annual income needed to afford the median-priced house remained mostly unchanged for several years until the beginning of last year, when the pandemic boom pushed prices higher, Redfin said. While prices are still up compared to a year earlier, the growth has started to moderate.
In the North Port, Florida, area, a buyer would need to earn $131,535 annually to afford the metropolitan area’s typical monthly mortgage payment of $3,288. That’s up almost 74% from a year earlier, the biggest increase of any major metro in the US, according to Redfin. It was followed by Miami, where the income necessary to afford the typical home jumped almost 64%.
Across the US, the monthly payment for a family buying a median-priced home has increased roughly 70% since February 2020, right before the pandemic lockdowns started.
This article was provided by Bloomberg News.